Renters Rights Act linked to London rental supply shortage
New data shows a significant reduction in rental property listings in prime London, attributed to the Renters Rights Act’s impact on landlord behaviour and lettings activity since its introduction in May.
Recent assessments by Knight Frank and Rightmove reveal that the number of new rental listings in prime central and outer London remains below the five-year average, with lettings activity also declining. The Renters Rights Act, which introduced stricter rent controls, possession reforms and safeguards against re-letting properties recovered for sale, is cited as a key factor affecting landlords’ willingness to let properties.
This supply shortage is driving rents higher, particularly in outer London, while the super-prime market continues to see strong activity due to different market dynamics. The data highlights a growing imbalance between tenant demand and available properties, with implications for landlords, letting agents and tenants alike.
Data reveals rental market shifts in prime London
Rightmove’s data for the three months to August shows new rental listings in prime central London (PCL) and prime outer London (POL) were 10% below the five-year average. Notably, new listings have not exceeded the five-year average since April 2021, indicating a sustained supply constraint.
Knight Frank’s analysis confirms that the number of tenancies agreed in London fell by 8% year-on-year in the same period, mirroring the decline in new supply. This suggests that fewer landlords are entering the market or renewing tenancies, contributing to tighter stock levels.
Within higher price brackets, the supply shortage is less pronounced. Rightmove reports that listings above £1,000 per week in London were 13% higher than the five-year average, reflecting a greater proportion of discretionary owners who prefer to let rather than sell amid a weak sales market.
Rents have increased by 3% in prime outer London over the year to August, while prime central London saw a more modest 1.2% rise. The demand-supply imbalance is starkest in outer London, where there were 8.7 prospective tenants per new listing in August, compared to 5.2 in central London. The super-prime segment, above £5,000 per week, remains robust with tenancy starts 13% above the five-year average.
Renters Rights Act’s influence on landlord decisions
The Renters Rights Act, effective from May, introduced a range of reforms affecting rent collection, rent increases, possession proceedings and restrictions on re-letting properties after repossession for sale. These changes have increased regulatory complexity and reduced the flexibility landlords previously had in managing their properties.
According to the data and market commentary, these legislative changes have undermined the financial viability of letting for many landlords, prompting some to sell or withdraw properties from the rental market. The Act’s safeguards against re-letting properties recovered for sale, in particular, restrict landlords’ options and may deter investment in rental housing.
Tom Smith, head of super-prime lettings at Knight Frank, notes that many prospective buyers are deferring purchases and opting to rent for an extended period, influenced by ongoing tax and regulatory uncertainties. This “wait-and-see” approach among occupiers is contributing to sustained demand but also highlights the cautious stance of landlords in a changing regulatory environment.
Practical implications for landlords and agents
For landlords, the supply shortage means increased competition for tenants and potentially higher rents, especially outside prime central London. However, the regulatory burden introduced by the Renters Rights Act requires careful compliance and may reduce profitability, particularly for smaller portfolios or individual landlords.
Letting agents face challenges in managing reduced stock and balancing tenant demand, while ensuring adherence to the new legal requirements. The Act’s possession reforms may lengthen eviction processes, affecting turnover and income stability.
Landlords should review their portfolios in light of these changes, considering the financial and operational impacts of the Act. Strategic decisions on rent setting, tenancy renewals, and property sales must factor in the evolving legal landscape and market conditions.
Uncertainties and ongoing developments
While the Renters Rights Act is firmly established, its longer-term effects on the rental market remain to be fully seen. Further government guidance or amendments could alter compliance obligations or landlord options.
The interaction of the Act with other tax policies, such as changes to stamp duty and non-dom status, adds complexity to investment decisions. Market responses may evolve as landlords and tenants adjust to the new framework.
It is essential for landlords and agents to stay informed of regulatory updates and seek current official guidance to ensure compliance and optimise portfolio management under the changing rules.
Considerations for landlords going forward
- Review tenancy agreements and rent review procedures to ensure they comply with the Renters Rights Act’s stricter rules.
- Monitor possession processes carefully, as reforms may affect timelines and legal requirements for evictions.
- Assess the financial viability of letting properties, particularly in lower price brackets where supply shortages are more acute.
- Keep detailed records of rent collection, tenant communications and compliance actions to support legal obligations.
- Evaluate local market conditions and demand trends, especially in prime versus outer London segments.
- Consider professional advice or membership support to navigate the regulatory environment effectively.
Supporting landlords through regulatory changes
The Landlord Association (TLA) offers resources and support tailored to the challenges posed by the Renters Rights Act and related reforms. Membership provides access to practical compliance guides, model tenancy documents and expert insights to help landlords and letting agents manage their portfolios within the new legal framework.
TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to assist members in organising property records, managing rental documentation and tracking compliance activities. Features relevant to the Renters Rights Act include tools for recording rent reviews, possession notices and tenant communications, helping landlords maintain evidence of compliance.
Through TLA membership and ORBIT access, landlords can stay updated on regulatory developments, prepare for inspections or disputes, and streamline property management tasks in a complex market environment.
Explore TLA membership and learn more about ORBIT BETA access to support your rental business in adapting to the evolving regulatory landscape.
Looking ahead, landlords and agents should anticipate further regulatory scrutiny and potential policy adjustments affecting the private rented sector. Proactive management and informed decision-making will be crucial to maintaining viable rental portfolios amid ongoing change.
Sources: Letting Agent Today
TLA - The Landlord Association